India’s largest lender, SBI, cut its base rate by 40 basis points (bps) to 9.3 per cent from 9.7 per cent, effective from October 5.

Earlier in the day, while state-owned lender UCO Bank cut its base rate by 25 bps to 9.7%, Oriental Bank of Commerce slashed it by 20 bps to 9.7%.

Axis Bank reduced its base rate by 0.35% to 9.50%, while Bank of Baroda cut its minimum lending rates by 25 basis points to 9.65%. “The RBI seems to have done its bit now while passing the buck to the government and the banks”. “At the same time, the growth in several interest sensitive sectors like real estate, construction, automobile, consumer durables and non-durables has been sub-optimal, crying for a build up of a market demand”, the chamber survey report said.

Economists had been expecting a cautious 25-basis-point cut and the 50-basis-point reduction means the repo rate is at its lowest since March 2011. (The move could pave the way for a relook at the system of base rates – the floor lending rate for banks – and the way it is calculated and more liquidity for rate signals to flow freely).

Since January, the RBI has reduced the repo rate by a total of 125 bps.

The central bank cut the policy rate by a quarter point in each of January, February and June as falls in commodity prices reduced inflation, giving it more scope to stimulate Asia’s third-largest economy.

Soon after the policy rate cut, RBI Governor Raghuram Rajan, as also Finance Minister Arun Jaitley, had yesterday expressed hope that banks will transmit the benefit to borrowers to boost investments and the economy.

It is the biggest rate cut in four and a half years from the Reserve Bank governor but apart from a few public sector banks which have cut rates, others banks are still guarded with their response.

The ministry announced a plan to review a small savings programme that competes with banks for deposits to ensure faster transmission of rate cuts. Once the base effect wears out, CPI inflation would be of the order of 5-5.5 per cent.

Shilan Shah, an economist at Capital Economics, added that the latest cut implied the central bank might have reached a “turning point”, marking the end of its easing cycle.